GworoChewinMaga:


At 500 to a dollar how many Nigerians will go for imported goods?

This is the key. Because if you discourage imports you don't necessary discourage the demand for such goods and as such businesses will spring to fulfil the demand.

You want a Givenchy suit at $2,000 but Rashidi can make same for 12,000 naira.

That is what places like Aba are doing

4Play:


Your premises are flawed and miss the substance of my posts. The government does not have to provide the forex as the market can adequately provide forex. The key difference is that the market will provide it at a price higher than N199 to the dollar which will reflect the true exchange rate value.

You may say that this may cause hardship for Nigerians but Nigerians are already experiencing hardship due to the hamfisted attempt to provide dollars at a fraction of its true value. Scarcity is the inevitable consequence of price fixing below the market value - hence fuel scarcity and dollar scarcity. Indeed, if you go back to the first Buhari government - we had scarcity of many goods as the government sought to fix the price of things like sugar.

One thing I have also noted in my previous posts is that the fixed exchange regime accelerates the Naira's depreciation as I noted here:#

chinchum:
Yes, we must focus on exports, but the exports needs to be more of finished goods, and not raw materials. Instead of exporting cocoa seedlings, we need to export chocolates !, Instead of exporting dried cassava, why not packaged garri ?.


Then atop of all, we must stop refined oil importation at most in the next 2 years, it is consuming over 38% of our forex

Nigeria's refineries should be privatised, i am aware the nnpc has received 9 bids from companies willing to set up new refineriees on the site of the current ones, in my opinion, they are moving slowly.

GworoChewinMaga:


At 500 to a dollar how many Nigerians will go for imported goods?

This is the key. Because if you discourage imports you don't necessary discourage the demand for such goods and as such businesses will spring to fulfil the demand.

You want a Givenchy suit at $2,000 but Rashidi can make same for 12,000 naira.

That is what places like Aba are doing

DropShot:

Whatever hardship Nigerians are going through now will become a child's play if sourcing for forex is completely left in the hands of parallel marketers.

In fact, I don't know of any country that does that successfully. If you know, I'll appreciate a few examples.

chinchum:
should naira becomes 500 naira to a dollar, Since we import refined oil, are you willing to pay 3 times more, what you pay for a litre of petrol say N300-350/litre? .

Are you aware the nations foreign debts will also rise in geometric progression?

GworoChewinMaga:


This is the catch 22 scenario.

For you to begin to export consumable goods you need the right leaders who will not suck up to the west.

The triangular trade doctrine is still in effect in place since the Europeans made it to our shores.

We must not have leaders that will turn our nation to a dumping ground and also aggressively follow an industrial policy and to achieve this we must put mediocrity behind and put meritocracy as our guiding light.

If Adamu insists on laying around reciting the Koran then he should be made to understand the opportunity cost of his choices.

4Play:


The conclusions he draws from the article - that it vindicates Nigeria's currency policy - are not borne out by the contents of the article. The article shows Egypt's ill-fated quest to solve its forex problems by fixing an exchange rate by fiat and cracking down on the black market. It has woefully failed and, thus, Egypt serves as a good example of the perils of a fixed exchange regime.

By narrowly focusing on devaluation, the OP misses the forest for the trees. The CBN's policy misstep is not a failure to devalue but a failure to allow market forces dictate the Naira's value given the CBN's lack of ammunition (i.e., forex reserves). Simply lowering the exchange rate's value by fiat will actually feed a speculation frenzy as the market will think that if you have done it once, you are going to do it again. Hence, it's better to leave prices to be determined by market supply and demand and not by government diktats.

I can't stop laughing . . .

What if I told you most countries manipulate their currencies? From Japan to China to Switzerland to the US (till sometime back), many others . . . Russia, Brazil. . . .

GworoChewinMaga:


At 500 to a dollar how many Nigerians will go for imported goods?

This is the key. Because if you discourage imports you don't necessary discourage the demand for such goods and as such businesses will spring to fulfil the demand.

You want a Givenchy suit at $2,000 but Rashidi can make same for 12,000 naira.

That is what places like Aba are doing

989900:
As annoyingly repetitive as it may seem, we can't get out of this quagmire without addressing the below 'causes' -- even if we devalue the Naira to N1,000 to a Dollar!

1. Check excess liquidity and currency racketeering/fraud (see Henry Boyo's explanation. . . I have posted many stuffs about it previously), while promulgating industry revolutionizing monetary policies.

2. Amend our laws to draw in investors (use propaganda if need be).

3. Amend power generation and transmission laws to attract investors in that sector . . . do everything possible on earth and beyond to achieve at the least, 15 hours stable power supply averagely (this would catalyze industrial revolution, while reducing demand for refined pet. products).

4. Refineries -- we need all four gov't refineries, and tens of modular ones running since last decade -- until we stop the importation of refined petroleum products that eats up, up to 30-40% of our Forex, we are going no where!
We were bringing in hundreds of millions of dollars in the early 90s from refined products exports, right now, we should have colonized West Africa with NNPC products everywhere (refined products have no OPEC cap)!

5. Encourage exports, and local content.

Re: Senator Bruce: As much as I admire his vigor and enthusiasm about the whole 'buyNaija' awareness, it's just a fraction in the scheme of things!

While importing palm oil from the same Malaysia we introduced palm oil to, importing eggs from South Africa we fought and paid to liberate, importing rice from a politically unstable Thailand, or toothpicks from hell are all 'weirdos', they account for far less than what
importation of refined petroleum products cost us; then we have the importation of aircrafts and parts and servicing which costs us hundreds of millions of dollars annually -- but Bruce believes it's about our average $20-$50 shoes or bags, $100 phones, or what-not (roughly 10-20 percent of our forex demand), or about our cheap $5,000 cars which by the way generates income for customs when they 'land', while gov't and it's officials are actually the ones bringing the forex gulping machines (probably without paying custom duties).
NBS just released a report indicating between January 2010 - September 2015, we spent over N20 trillion (roughly $130 BILLION . . . 2014 dollar) on just importation of PMS, AGO, and DPK alone!
Same refined products we mine from our backyards, same refined products we were net exporters of (raking in millions of dollars from), 25 years ago! If this is not madness, what is?

Re: Ifeanyi Ubah: Though he is yet to disclose his so called "secret" or magic wand (but I guess it is: probably supporting the country's fuel import-consumption . . . probably for some while).

My own idea of bringing the dollar exchange rate to below N200 in say 3 months would be namely:

Stop the importation of refined products now and find alternative to how we survive without it -- it gulps 40% of our forex!

Crazy, right? However, we probably can (everyone's contribution and criticism would be helpful here), if the gov't is serious about it, and if it can carry the people along especially with the budding awareness of the demise of our economy.

1. Get the NNPC, special task forces, Armed forces, and the people on board as regards protecting the pipelines.

2. Get NNPC to make sure the refineries do not slouch again, rather, increasing in production.

3. Get the few trains we have working, and create an awareness on conserving fuel.

4. Provide very affordable mass transit buses, while encouraging car owners to shed usage, or re-introduce something similar to our old 'odd number/even number system' for cars that should have access to the road on particular days.

5. Provide gas, give free/cheap cylinders to boot if necessary.

6. Power: without fairly stable power supply it will be a difficult one. Fairly stable power reduces the need for PMS and AGO, reduces importation of generators and alternative power equipment.

7. Checkmate cross-border fuel smuggling.

8. Modular refineries: they can be imported and made operational in months.

9. Sell off some portion of gov't assets to foreign investors. #ppp

Additionals:

10. Encourage Nigerians overseas to invest back home.

11. Recover all debts, 'stolens', and 'accruables'.

12. Reduce gov't recurrent expenditure and buying local for all gov't purposes if available -- starting with them senator's cars, and presidential budget and travels.

13. Consider changing currency colors.

14. Agric exports.





If we can do all the above (sounds crazy though . . . desperate situation calls for desperate measures), our refined fuel consumption rate should drop to 'near' what NNPC can support, or at worst, greatly reduce importation of refined fuel by more than 60%. Then we "buynaija"; the Naira will firm up, and the CBN can probably tweak the exchange rate to gain say N2-N4/$, which will indicate a direction of positive purpose, causing the BM, hoarders, and racketeers to panic-sell their dollars, while the CBN tries its best to enforce and enhance/support a strict range for bank rates.

Devaluation in our case', is a symptomatic approach to a systematic malady: underlying causes won't be cured!
It's like taking paracetamol as a curative for stage 4 cancer -- it 'probably' might make your pain dissipate (very likely it won't), but just for a very little while.

*Everyone's contribution and criticism would be helpful here.

GworoChewinMaga:


In the US forex is sourced not from the federal reserves but banks and other private entities.

China is following this policy of deregulation the forex market and seeing the benefit of its citizens owning forex as against only the govt providing forex.

The direct impacts of this is that Nigerians can have a local account in any foreign currency o their choice. This will thus limit capital flight and also ease the pressure of having one source for forex.

The case o putting all your eggs in one basket is what Nigeria is doing by having only the CBN to supply and hold forex.

As things stand now the naira is non convertible outside Nigeria and as such is seen as an artificial currency.

GworoChewinMaga:


This is why I supported the removal of fuel subsidy and also the deregulation of the down stream sector that could only come to pass with the passage of the PIB.

You see how we are light years ahead of you zombies.

jollymizzle:
this is where you got it wrong.you see we can't suddenly start being self sufficient at once,those people who buy givenchy suit for 2k USD do that because they can afford it,and if the dollar becomes 500naira,I can tell u that more than half will still buy it.but what happens to the common people who need drugs,people who jst want a fan for their homes.and someone talked about the price of PMS.how would the populace cope with such a high price.we can start looking inwards but don't think it's something we can achieve in an instant.it is just not possible

And just to mention, banning importation has little or no effect in this equation, our biggest Forex guzzler at 40% is refined petroleum products, I think we should ban that first (by far the most senseless imports into this country . . . but see where we are . . . stuck with it) before banning other imports that suck averagely 20-30%. While repatriation of funds and other settlements account for the rest. If the right policies and infrastructure are in place, we wouldn't need to be importing palm oil, rice, tooth picks, eggs and other weirdos in the first place, rather, we should be exporting those, we would have real sector investors coming in with 'hard currencies' = less pressure on the dollar.

Devaluation won't stop all that, it hasn't so far, it would only encourage smuggling . . . like I said earlier, once you devalue, there is call for wage increase which triggers 'further inflation' and makes available money to buy 'the same now more expensive imported goods' = pressure back on the dollar = back to square 1.

chinchum:
No, it must be gradual, throwing the naira /usd to market forces at one go is not advisable, the policy on forex restrictions to certain goods that can be locally sourced immediately is better, as the outputs of efforts to produce some goods locally begins to increase, those goods can be added to forex restrictions e.g Rice.

GworoChewinMaga:


Biafrans were refining crude, manufacturing bombs, ammo and guns and even spare parts for vehicles, trucks, armoured tanks and aircrafts during the blockade.

Necessity is the mother of invention.

Do not underestimate your race and nation.

The ibos are Africans and Nigerians and have proven that Africans can be industrious too.

It is time we either promote ingenuity in place of a corrupt quota system that only pushes mediocrity.

chinchum:
Well, the 'west' wants us to devalue the naira. Is that what you want?

jollymizzle:
yes we can start doing these things but it won't happen overnight.what about drugs,hospital equipments (MRIs,dialysis equipments.x-ray machines) what about phones,tvs, cars,imagine we still don't have an option to dstv not because we haven't tried to.we need to be backed by a major power such as China.that is what this adminstration is doing and I just pray it works out.we need infrastructure, power.fuel before we can dream of these things

4Play:


A gradual devaluation is the worst of all possible worlds. If the government gradually devalues the currency, that will feed a speculation frenzy as each devaluation is taken as a signal that more is in the pipeline. If investors know for certain that the Naira is going to be devalued, they will speculate accordingly excacerbating the Naira's fall. Each devaluation will push the black market rate further away from the official rate.

The best bet is to give up fixing prices by fiat, let market forces determine the price. The longer you leave it, the wider the gap between the official and the black market rates. In the Abacha era, the CBN fixed the official rate at N22 whilst the black market rate hit N85. Well connected people made a fortune from round tripping (that is where we are headed to if we don't eliminate this Abacha style exchange rate regime).

You are also overestimating the government's capacity to select winners and losers. This is a government that cannot provide fuel, water, electricity or even draft a budget in time. Restrictions on imports create bribery opportunities for our border agencies and such a resort to aurtakic policies have a resounding history of failure.

The said thing is that we act like what we are experiencing are policy innovations in Nigeria when we have already been through fixed exchange rate regimes and import-substitution policies in the 70s and early 80s. These policies did not industrialise Nigeria, they created economic distortions which facilitated our economic collapse in the 80s. These zombie ideas - ideas that should be dead and buried - gain acceptance in Nigeria because Nigerians are not keen students of history and our demography is dominated by youngsters who did not experience these dire policies at the time.

GworoChewinMaga:


As things stand now, the little manufacturing base you have is owned by western conglomerates who are using the devaluation policy to buy up cheaply your nation.

As I said the key is promoting local business manufacturers.

And you can never achieve that in this atmosphere of mediocres in power

GworoChewinMaga:


No nation is an island.

I am not against foriegn trade but only that which we can not easily compete.

As for drugs, India has an aggressive policy if lobbying for patents to produce generic drugs.

The new hepatitis B drug cost about a thousand dollars a pill. India has secured the patent to produce locally for less than $20.

There is a way out

989900B:


I can't stop laughing . . .

What if I told you most countries manipulate their currencies? From Japan to China to Switzerland to the US (till sometime back), many others . . . Russia, Brazil. . . .

4Play:


A gradual devaluation is the worst of all possible worlds. If the government gradually devalues the currency, that will feed a speculation frenzy as each devaluation is taken as a signal that more is in the pipeline. If investors know for certain that the Naira is going to be devalued, they will speculate accordingly excacerbating the Naira's fall. Each devaluation will push the black market rate further away from the official rate.

The best bet is to give up fixing prices by fiat, let market forces determine the price. The longer you leave it, the wider the gap between the official and the black market rates. In the Abacha era, the CBN fixed the official rate at N22 whilst the black market rate hit N85. Well connected people made a fortune from round tripping (that is where we are headed to if we don't eliminate this Abacha style exchange rate regime).

You are also overestimating the government's capacity to select winners and losers. This is a government that cannot provide fuel, water, electricity or even draft a budget in time. Restrictions on imports create bribery opportunities for our border agencies and such a resort to aurtakic policies have a resounding history of failure.

The said thing is that we act like what we are experiencing are policy innovations in Nigeria when we have already been through fixed exchange rate regimes and import-substitution policies in the 70s and early 80s. These policies did not industrialise Nigeria, they created economic distortions which facilitated our economic collapse in the 80s. These zombie ideas - ideas that should be dead and buried - gain acceptance in Nigeria because Nigerians are not keen students of history and our demography is dominated by youngsters who did not experience these dire policies at the time.

GworoChewinMaga:


As things stand now, the little manufacturing base you have is owned by western conglomerates who are using the devaluation policy to buy up cheaply your nation.

As I said the key is promoting local business manufacturers.

And you can never achieve that in this atmosphere of mediocres in power

4Play:
What has been called for is a free float of the Naira and not mere devaluation. If the CBN comes out today and announces that the Naira will now exchange at N280 to the dollar, that does not eliminate the problem as fixing exchange rates by fiat with insufficient reserves is a recipe for disaster. This is what the Egyptians have done and it goes against sound macro-economic advice.

A free float eliminates the black market as you have one exchange rate market and the market determines the exchange rate. People don't realise that having a fixed exchange rate regime in Nigeria was the norm from the 70s to the 80s and it helped hollow out our economic capacity and created all sorts of economic distortions.

Prices dictated by supply and demand play a crucial signalling role in the allocation of economic resources. By maintaining an inflated exchange rate, resources are misallocated and necessary economic adjustments are not made until it is too late.

You have to ask yourself - what does having the Naira at N200 to the dollar do for the economy other than to make imports cheaper? Why do these our so called nationalists want to make the importation of goods cheaper when they claim that Nigeria needs to weans itself off the dependence on imports?

aeronot:
Lets stop deceiving ourselves, if you want to do an online transaction the banks are charging black market rates 319, it is only when u are receiving money or changing dollar to naira the banks gladly charge 199! We should stop all this deceit!

GworoChewinMaga:


No nation is an island.

I am not against foriegn trade but only that which we can not easily compete.

As for drugs, India has an aggressive policy if lobbying for patents to produce generic drugs.

The new hepatitis B drug cost about a thousand dollars a pill. India has secured the patent to produce locally for less than $20.

There is a way out

aeronot:
Lets stop deceiving ourselves, if you want to do an online transaction the banks are charging black market rates 319, it is only when u are receiving money or changing dollar to naira the banks gladly charge 199! We should stop all this deceit!

DonBobes:


Yea u r right, GTB charged me 313 to a dollar. I fainted wen dey removed their money and checked my balance.

musicwriter:


Unfortunately, you people thinks once the Naira is devalued or free-float as you call it, the problem would be solved. This Egyptian example is a lesson to you.

Our fundamental problem is not free float, exchange rate, e.t.c. Our problem is the government is not earning enough dollar at the moment. Our fundamental problem as a whole is we don't export enough to earn dollar inflows.

If you like make it 1 Naira to $1 officially, or N320 to $1 officially. There'll still be black market.

If you make the Naira 320 to $1 today, the black market would skyrocket to 400 to $1 immediately. Forcing us to make a second devaluation of N400 to $1, officially. And so on. And before you know it we become another Zimbabwe.

That's how Zimbabwe got 1 Trillion single note!!.